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bitsCrunch 2022 NFT WASH TRADE REPORT is ready for you.
We wake up with news that one or many renowned brands are getting into the NFT space every day. Apart from encouraging arts, NFTs are also used as marketing and promotional avatars by brands — McDonald’s, Gucci, Nike and Adidas, to name a few. Just within a day or less than a few hours, the NFTs released are getting sold like hotcakes. On the downside, NFT minting is making the planet hotter. Ever thought about NFT and the impact they have on the environment?
A gaming computer requires 300–500 watts of power for operations which is greater than the power consumption of a laptop. Imagine if a gaming pc could use up so much power; what about the characters or backdrops created? What about the NFTs associated with each game that is built on blockchains?
You wouldn’t be surprised if we say an individual in this current world utilizes 58 kWh per day, and 95% of this energy is involved in performing a single transaction on Ethereum for NFTs. While this must be alarming, we’d like to throw some light on the “WHY” of NFT Energy Consumption.
So what’s exactly happening on Ethereum when an NFT is minted?
Digital assets like NFTs are stored, bought, and sold through blockchain technology, and Ethereum is one such blockchain where most NFTs exist. Marketplaces like Opensea, Rarible, Axie Infinity, and SupeRare are built on Ethereum, trading thousands of NFTs for millions of dollars each day. To perform these transactions, the blockchain requires some technical prowess which is actually making the whole process a counterproductive one in terms of energy.
So, what’s behind this tech-savvy and energy-consuming process in blockchain and NFTs? Proof-of-work and Proof-of-stake! They are often regarded as abstruse concepts of Blockchain Technology. We’ve unraveled it for you! Read further.
Proof-of-work is the transaction validation or consensus mechanism that happens with cryptocurrencies and NFTs in a blockchain.
Imagine you are selling your BTC to someone, and it is a new transaction happening on a blockchain. A new block is added for every new transaction, and every new block has a hash.
This activity is performed by Crypto miners worldwide who are present in the specific node.
For each block to get validated, the hash of the target block should match with the hash that is being generated by a crypto-miner who competes to win the right to make this transaction.
The miner who is involved in the transaction and updating of the blockchain process will be rewarded with cryptocurrencies and transaction fees.
Several miners compete to win this transaction right by finding the target hash. They use trial and error to solve a puzzle and find the hash matching the target.
From this series of activities, it is evident that a miner who has a machine with better computational power will only be able to do this work.
More computational power boils down to having highly configured machines with Graphics Processing Units (GPU) or Application Specific Integrated Circuits (ASIC), which miners predominantly use.
A conventional desktop computer expends 0.06 ‐ 0.25 kWh/hour, and a laptop draws 0.02 ‐ 0.05 kWh/hour of power in an average day when used for 8 hours, while GPUs use anywhere from 25kWh to 350kWh of electricity per day.
The entire process is energy exhaustive, but it is set in this manner for intruders to prevent the manipulation of transactional data. This is precisely how decentralization differs from the traditional centralized financial system.
Due to the downsides, technological evolution further led to Proof of Stake, an alternative solution. This approach is said to have lesser energy consumption, mild environmental impact, and at the same time do justice to the prime purpose of why NFTs were brought to utility.
Unlike proof-of-work, this consensus mechanism allows validators to pledge their cryptocurrencies, set up a validator node, and get the right to verify and add new blocks to the blockchain. The validators can also unstake the cryptocurrencies if they want to trade them.
A new block is added to the blockchain for every accurate transaction, and the validator gets crypto rewards. However, they lose some stake of the cryptocurrency that’s being pledged for inaccurate ones.
So, how do the validators get picked?
The proof-of-stake protocol picks validators based on factors like stake amount, time period of validators staking the coins, staking pools, etc. For any validator, if the % of stake is higher and being held for a long period of time, then the probability of winning the right to validation is higher. Staking pools involve groups of people setting up a validating node together, winning the right to validation, and splitting the reward among themselves.
The process here doesn’t involve the usage of high-end equipment and is therefore considered to have lesser energy consumption and climatic impact, especially when NFT minting happens.
Proof-of-stake is also regarded as the efficient, inexpensive, and enhanced transaction process for the amount of power consumed during NFT minting.
Some of the blockchains like Polkadot, EOSIO, and Cardano use PoS, while the giant Ethereum is undergoing a transition from PoW to PoS — Ethereum 2.0 to be unveiled soon.
Having said that, you may now not be overwhelmed by the fact that NFTs are getting greener, and technologists are striving hard to bring down the adversities they have on the climatic conditions and environment.
-Ethereum 2.0 is most anticipated by crypto frenzy as it can cut down the equipment building costs, reduce carbon footprint, and energy consumption in turn. Let’s look forward to it.
-Off-the-chain transactions can be functioned by adding up a second layer on top of the existing blockchain. Here, the parties reside outside the blockchain and use a guarantor to mediate the transaction. The private key exchange takes place between the parties for a specific amount of crypto. The coin remains in the wallet, and the address remains unchanged while having a new owner outside the chain. Bitcoin first introduced this as “ The Bitcoin Lightning Network”.
-Private blockchains like Ripple, Flow, Hyperledger Fabric do exist but differ from major aspects of decentralization.
-Artists have come forward to raise funds to motivate developers to work on and propose an alternative system to validate and update transactions on a blockchain.
For greener NFTs and sustainable minting, 5ireChain serves with proof-of-stake under nomination, incentivizes through proof of benefit, and creates a positive impact on the real and virtual world through proof of donation.
Belonging to this revolutionary Web 3.0 community, we at bitsCrunch have partnered with 5ireChain to support their measures and guard the NFTs that belong to their blockchain and ecosystem.
Nevertheless, the crypto community is inching closer to building a consensus system that involves lesser power consumption with blockchain transactions and NFT minting. We firmly believe that the day is not too far.
What do you think?
So, that’s about the whole NFT energy consumption. Have you got the gist of it all? Check out your retention skills here!
Frequently Asked Questions
NFTs are Non-Fungible Tokens, and in layman terms, representing digital art or collection, video clips of best moments in the sports and entertainment field, gaming skins and collectibles, stored in a distributed ledger powered by blockchain technology. These are unique items and are not interchangeable with another NFT.
Generally, things are valuable when they are scarce. There is only one Mona Lisa. There are only 59 Le Bron James dunking NBA Top Shots (one of which sold for $US387,000).
The primary difference between the two is that unlike cryptocurrency and digital currency, NFTs cannot be traded for each other as they are unique. representations of real-world assets. Cryptocurrencies and digital currencies can be traded for each other as there will be no loss to their value.
An NFT is a unique digital signature that you can attach to an asset. Whether that’s a song, or an image, or a piece of footage, a unique digital signature is like a fingerprint that contains information like who created the asset, when, and any conditions on its future sale (for example, whether or not the creator gets a percentage of when it is on-sold).
BCUT is the native digital utility token, it provides access to bitsCrunch services and the bitsCrunch network.
BCUT is the native digital utility token, it provides access to bitsCrunch services and the bitsCrunch network. It is designed to play a vital role in the functioning of the bitsCrunch ecosystem and is intended to be solely used as the primary utility token on the network.
We are a Cross-functional team with more than 25+ years of experience in Data Analytics & Artificial Intelligence and Blockchain. We already have all the NFT data since its inception. We blend our AI expertise with the Blockchain to bolster the NFT ecosystem.
We have built a model to identify the impersonation of artworks, thereby preventing the Provenance of the artist and the artwork. We are offering our services in a SaaS manner, wherein the customers can stake a certain amount of our native tokens to avail our services.
We haven't launched our BCUT Token yet, but we will send out a confirmation on the launch of the token on our official website and official Telegram channel.
DONT MISS OUT
bitsCrunch 2022 NFT WASH TRADE REPORT is ready for you.